Accounting 551 Course Project – Summary of Significant Accounting Policies
Notes to Consolidated Financial StatementsNote 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESNature of OperationsThe Alpine Ski Company’s (the “Company,” “we” or “us”) business is focused solely on providing high-quality, fashionable ski equipment and apparel. Our products are sold in more than 50 countries, predominantly through internet sales and retail operations which consist of 550 retail stores. Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from those estimates.Principles of ConsolidationThe consolidated financial statements include the Company’s majority-owned subsidiary. All significant intercompany transactions are eliminated. The Company has a non-controlling interest in a partnership which is reported using the equity method. Revenue and Recognition Although revenue recognition for the Company does not involve significant judgment, it represents an important accounting policy. Revenue and the related cost of goods sold are recognized at the time the products are received by the customers. At the store level, revenue is recognized when the customer receives and pays for the merchandise at the register. For online and catalog business, revenue is recognized at the estimated time the customer receives the merchandise. An allowance for estimated returns is recorded based on estimated return patterns and other assumptions that management believes are reasonable.
Cost of Products SoldCost of products sold includes the purchase cost of products sold and all cost associated with getting the products into the retail stores including buying, warehousing and transportation costs. Lastly, cost of sales includes appropriate vendor allowances. (See Note 2).Selling, General and Administrative ExpenseSelling, general and administrative expense (SG&A) is primarily comprised of marketing expenses, selling and administrative expenses, research and development costs, administrative and other indirect overhead costs, depreciation and amortization expense on non-manufacturing assets and other miscellaneous operating items. InvestmentsInvestments securities consist of available-for-sale and debt securities. Inventory ValuationInventory consisting of equipment and apparel is stated at the lower of cost or market using the first in, first out method. Property, Plant and EquipmentProperty and equipment are stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets, which range from 5 to 20 years. Leasehold improvements are amortized over the useful life of the related assets or the lease term, whichever is shorter. Repairs and maintenance expenditures are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period.